Its easy selling to the Chinese, right?
As Alibaba goes public, and many people make a fortune off
the stock, I’m reminded of how so many American companies have gone to China
and failed. Ebay, and Amazon in
particular.
Facebook and Twitter are of
course banned. Google.
These same companies dominate nearly everywhere else on the
planet. Why do they fail in China?
It’s neither white nor black. My Chinese friends here in America are
convinced the Chinese government simply keeps them out, as they won’t commit to
self censorship. But what of Amazon and
Ebay? Were they really outsmarted by
their Chinese counterparts? I’d say yes,
they were, but with a nudge from the Chinese govt perhaps as well. And this dovetails with what I want to write
about today and get out of my system, ie how hard, so very hard it is to do
business with the Chinese. Not as a
supplier. As a customer. It is very hard for a small guy like myself,
let alone for a large company to simply sell things to China.
Back in the 80’s the West had the same issue with the
Japanese, and the Koreans. Like everyone
else I thought Japan was a wealthy country until I actually moved there in the
early 90’s. I was appalled at how badly
the Japanese lived. Flimsy rice paper doors. No showers.
No ovens. Etc. Of course what I did not understand was that
Japan being so crowded, it just didn’t have the room to enjoy the Western style of living. China is the same. But that provides opportunities.
Western companies have had large success in China. But it’s usually in a non strategic industry
like a supermarket, or an industry that China needs help with, ie automotive.
(China was smart to make foreign car companies start JV’s in
its country in order to sell to the Chinese market. This was a major principle of China doing
business with the West in the 80’s and 90’s.
Have you noticed China does NOT do this with Africa, and other
developing economies? When the shoe is
on the other foot, China doesn’t seem too interested in sharing any technology,
and even imports its own workers.)
It seems the
agricultural industry is where most nations have the most luck trading with
China. I believe America even has an
agricultural trade surplus with China.
I will say this:
China will not truly mature as a nation until it learns to buy from
other countries. Or more to the point of
what I want to rant about: until it
allows anybody, big or small, to come
to its country to conduct business in an open and transparent way, without fear
of having to pay someone off.
It is not the large companies that will make China grow, but
the little guys with the ideas. The entrepreneurs
for crying out loud. The ability of
entrepreneurs to freely conduct business as they wish within China’s borders
will make or break the Heavenly Kingdom.
People like me, dammit.
Japan taught me one thing:
how to take advantage of space. For
example, everywhere one looks in Japan
one sees the multi-level outdoor parking garages, several stories high, that are automated.
Not too big, not too obtrusive.
China needs the same thing.
This takes away the need to build massive underground parking garages,
and is an efficient use of space. Want to
know how to make money in China: go to
Japan.
Except I can’t do it.
Having the idea in China just isn’t good enough. And having the capital is only half the
battle. And that in one line explains why
America will prosper and China will not.
Like I’ve said over and over a country has to have an environment where
the ideas can be implemented into action.
China can’t rely on cheap labor to grow its way out of
poverty forever. It will need new ideas
from people who are not government officials.
In Most Western countries it is small business that is the true engine
of the economy. Not the government, or
the banks. Sooner or later it has to
give the little guy like me a break. As such, China is a long, long way from
transitioning to that phase.
Yet, China has already shown that small business can thrive
in its country. Just look at all the KTV’s! With a simple payoff to the right person, KTV’s
have shown that a small business can thrive pretty much unimpeded within China. Do they pay taxes? I do not know. As such, I would argue that the most
successful type of small business in China is the KTV.
In China, I honestly speaking would not know where to begin
to legally start a business in order to execute upon an idea. (the parking
garages) And even worse, I’m not even
sure foreigners are allowed to start their own construction oriented business
in China.
More to the point, I wouldn’t know who to payoff. That’s why I’m convinced no small laowai can
truly start his own business in China and make money off the Chinese. China even makes it a point to “go after”
large Western companies. Walmart was
caught selling fox meat, that was improperly mislabeled. My response: so what? Seriously. So the fuck
what?
How many jobs does WM create in China?(whoops….that’s a
laowai way of looking at the issue)
Doesn’t WM have internal quality standards and wages easily
higher than any comparative Chinese company?
And yet the Chinese gov’t chooses to go after these guys.
Maybe that’s the problem:
a country used to low standards will not appreciate the work it takes to
reach and maintain a higher standard.
I went to a local food store in Hangzhou a few years ago
with the wife and M&L to buy some things.
The internal power was out. Yet
they were still open. When I’m in a
surly mood I will not hesitate to unleash my mandarin. I complained I couldn’t buy any milk if the
freezer is out of power. The worker
couldn’t care less. You think the power
is ever gonna be out at a WM? Or I’ll
receive a “I don’t care” attitude from them?
Take a look at Xiaomi. It’s a cheap smartphone that is piggybacking
off the back of Apple and Samsung, and even Huawei, etc. It will makes its founder a zillion
renminbi. But at the end of the day it
will still be a cheap ass phone, that shows everyone you have it because you can’t
afford an overpriced Iphone. And it took
him ten years after the release of “smart phones” just to get this to
market.
Don’t get me wrong. He
sees a market. China has 800 million
peasants. That’s 800 million customers
for Xiaomi. Congratulations. But do you want to be the country that sells
to the pauper or the country that can get away with selling an overpriced product
to the middle class and beyond? China will
not get rich selling to peasants. One doesn’t
have to innovate to sell to the poorer segments of one’s society. One simply needs to be cheap enough.
Foxconn has a million workers in China. Think about that for a moment. It tells you about the scope of China’s
size. And yet probably over 90% of
Foxconn’s biz is selling to the laowai.
And yet China still goes after Apple, for some silly nonsense as regards
a warranty. Did anyone see any Chinese
newspaper go after Foxconn as to how they treat their workers? Did the People’s Daily have a front page
story on the suicide rate?
This sense of entitlement I see in China’s media is too
surreal to take seriously. Don’t hold
your breath for an investigative series on how Xiaomi treats its own supply chain,
by the way. Unless the CEO becomes a
laowai that is.
China is an awful lot
like America was in the 1800’s:
Cheap and plentiful labor.
Immigration was unregulated, and
fueled the Great American Expansion.
Insular. Not really
caring too much about life anywhere else.
Our focus was on settling the West, and wiping out the Indians in order
to do so.
Imports? What imports? America consumed everything it made. (Only the Carnegie’s and Rockefeller’s had a
need for European goods.) And it
exported the rest. America had a nearly continuous 150 year trade surplus.
Lack of IP Protection:
we copied not only from the Europeans but even from ourselves.
But that is where it ends.
As I sit and read Nothing Like it
in the World by Stephen Ambrose, I can’t help but come away very impressed
with the “can do” spirit of the times.
Does China have a “can do” spirit? Yes, it does. (“We’ve decided we want to go
build bullet trains. We will fund
you. Go build them.”) But it comes from
the top down, not the down up. And that’s
the problem. A government bureaucracy,
by nature, cannot be a fountainhead of new ideas. All it can do is be the banker. When the government leads the way, a dollar
towards building something for the people is also a dollar in someone else’s
pocket. And when government officials
are busy taking what they can, things like Safety and Engineering go out the
window. The project is no longer for the
benefit of the people but for the enrichment of the government official.
In sum, it’s frustrating having an idea in China, and even
the capital, but still not the means to implement it.
1. Chinese are good at small business. Look at Chinese immigrants around the world. In particular, in SE Asia, ethnic Chinese or Chinese who intermarried (like in Thailand) dominate the economic sphere of the countries, and that is why they are hated so much. Chinese people can clearly succeed in small business. The problem is the elite cares only about face and control. In it not new. There is no reason that China could not have modernized along with Japan. There were Chinese who wanted to, but the Late Qing Dynasty only cared about palace intrigues, and the face of the imperial system that was collapsing.
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